Financial Quotient

What is 'days payable outstanding'?

Days payable outstanding (DPO) refers to the average number of days a company takes to pay its suppliers. It can be estimated by dividing the average account payables of the company, say, over a year, by its average daily purchases from suppliers. It can also be computed over a monthly or quarterly period.

DPO is a reflection of how quickly the company needs to pay its bills from the suppliers. An increase in DPO over time indicates that the company is taking more time to part with its cash to pay the suppliers. The longer the DPO, the longer the cash is kept within the company to generate more economic returns.

The Straits Times

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